The report showed that the benefits of coal seam gas were marginal compared to the environmental risks it entailed. Photo: Glenn Hunt

Rising prices will be driven by the completion of an export terminal for gas in Queensland that means Australian consumers will, for the first time, need to vie with those in Asia for supply. Asian consumers currently pay up to five times more for gas.

But an upper house select committee report has found that the government's preferred answer to rising prices, increasing coal seam gas exploration, will do little to overcome the problem.

"[NSW's] gas supply would be very small in the context of the world gas market and will not impact upon the world price," the report found.

But the state's energy Minister Anthony Roberts said CSG projects would have an impact. He said the state currently imports about 95 per cent of its gas, but two projects in Gloucester and Narrabri, which will supply gas exclusively to NSW could see that figure drop 70 percentage points.

Advertisement

The Shooters and Fishers and Greens-led committee said that the state government and industry's predictions of a looming shortage of gas supply were misplaced.

Citing research from the University of Melbourne, the committee found it was more likely that demand across the state would decrease sharply, as rising prices caused consumers switched to coal-based fuel and energy-efficient appliances and gas-dependent manufacturers to shut down.

The state government instead favours analysis from the Australian Energy Market Operator that a shortage is more likely.

The committee further called for the government effectively to put a brake on all further coal-seam gas activity, until the government implements all reforms recommended by the state's chief scientist.

The government has instead promised to freeze new coal-seam gas projects until later this year while it reviews regulations.

The energy minister, Anthony Roberts, said that NSW already had "the toughest controls for CSG in the country" and the government had committed to implementing the chief scientist's recommendations.

Committee member Jeremy Buckingham, a Greens MLC, said the report showed that the benefits of coal seam gas were marginal compared to the environmental risks it entailed. "For such a tiny benefit, coal seam gas is simply not worth the risk," he said.

The inquiry instead recommended that NSW shield itself from price rises by brokering a national agreement to reserve a portion of the gas produced in Australia from being exported, such as happens now in Western Australia.

The report conceded there was little political appetite for that solution from gas-producing states.

Mr Roberts said that idea had already been canvassed between the states and was "emphatically rejected".

"When it comes to energy security," he said, "hope is not a strategy."